I have fixed deposits and a savings account with a bank. I want to invest in a liquid fund. The fund house is a sister concern of the bank. Can I transfer the money directly to the liquid fund?

—P. Mishra

When you invest in a fund, the money needs to be sent to the ‘scheme account’ maintained by the fund house for that scheme. It does not matter which bank’s account the money comes from—whether or not the bank is in the same family of companies. I do not quite know what you mean by ‘transfer the money directly’. When you make a payment for an investment, the money does go directly to an account maintained by the mutual fund company regardless of the bank originating the payment. I suggest you verify with the fund house as to what is the safest and most expedient way of transferring money, and employ that mechanism.

When reviewing funds in a portfolio, which parameters should be kept in mind? How should I calculate the returns for SIPs? I have been investing Rs5,000 every month in ICICI Prudential Tax Plan since 2010.

—Nisha Tyagi

Portfolio reviews can be done methodically following a process of two or three steps, depending on the type of portfolio. First, if you are following an asset allocation method for a portfolio, you should see if the current allocation (at the time of review) has deviated significantly from the original intended allocation. If the deviation is more than say 5%, you should consider a rebalancing exercise to restore the initial allocation ratio. Second, if you are investing in a goal-oriented portfolio, you should look at the overall portfolio performance relative to the goal time frame and see if you are keeping on track to reach the goal. If you are falling short, you should see if it is due to portfolio asset composition (too little equity?) or if it is due to poor fund performance. In either case, you should consider remedying, if the performance deviation is either sustained or if it is too high. Third, if the portfolio is a general long-term wealth-building portfolio, you can simply look to see if the funds are still worthy of belonging in your portfolio. Please do not put too much emphasis on recent (6 months or 1 year) performance of a fund. See if the fund has beaten its benchmark consistently over the past 8 to 12 quarters (1-2 years). Also, if the fund is ranked in the top two quartiles among its peers. You could use curated lists of funds such as Mint 50 as guideline for conducting a review.

Regarding SIP performance, it is not a trivial exercise as it involves calculating returns for investments made over multiple instalments at different NAVs. However, thankfully, there are several online tools for making this job easier. You can find ‘SIP returns calculators’ online, which can calculate your returns given the name of fund, monthly date of investment, and the number of instalments.

Do I have to pay anything if I switch from one fund to another of the same fund house?

—Natalia Joseph

Switches can happen only between funds in the same fund house and they are not subject to any explicit ‘switching’ fees. However, such transactions are considered as withdrawals from the original scheme and as investments in the new scheme. As such, they would be subject to consequences such as taxation and exit loads, as a withdrawal would entail. For example, if you switch from a liquid fund to an equity fund, the date of switch would be considered the date of investment for the equity fund, and the date of withdrawal from the liquid fund. So, any capital gains you would have had in the liquid fund would be subject to appropriate taxation, depending on the period of holding. Similarly, if you switch from an equity fund to a debt or liquid fund, exit load might apply for the equity fund withdrawal if the period of holding is within the exit load period. However, some mutual fund companies do waive the exit loads in certain situations in the interest of maintaining the asset within the fund house. You may want to check with the specific fund house to verify the situation in your particular case.

What is the difference between Aditya Birla Sun Life Liquid Fund (Growth) and Aditya Birla Sun Life Cash Plus? I want to invest Rs2 lakh for a period of 6 months. Which of these two funds would be more suitable?

—Manish Jaluka

Aditya Birla Sun Life Liquid fund (previously ING Liquid fund) has been merged with Aditya Birla Sun Life Cash Plus fund since 2014. Hence, of the funds you mentioned, only Aditya Birla Sun Life Cash Plus fund exists now. There is one other liquid fund in this fund house’s suite of products and that is Aditya Birla Sun Life Floating Rate Fund Short Term plan. However, the difference between these two is too marginal to matter. So, you can stick to your Cash Plus fund choice for your short-term money-parking need.